Feeds

UK.gov abandons income splitting tax law

'Economic challenges' puts lid on controversial overhaul

Providing a secure and efficient Helpdesk

The government has dumped legislation intended to overhaul income splitting arrangements among individuals that would have effectively forced small, family-run businesses to pay more tax.

In an embarrassing U-turn, Chancellor Alistair Darling said during his pre-budget speech on Monday that Her Majesty’s Revenue & Customs (HMRC) would indefinitely delay bringing in the new law.

The renege will cost the Treasury more than £450m over the next two years.

Legislation to prevent spouses divvying up income earned from small businesses solely to reduce their joint tax bills had been expected at the start of April 2009.

HMRC estimated in January this year that some 85,000 companies throughout the UK were currently working the system to their advantage.

The loophole was brought into sharp focus in July 2007 when Arctic Systems beat the taxman, which had pursued the small, family-run IT services firm for what it claimed was unpaid taxes.

The government responded by announcing an overhaul to the system after the House of Lords threw out an HMRC appeal against the practice in favour of Arctic bosses and married couple Geoff and Diana Jones.

"Given the current economic challenges, the government is deferring action and will not bring forward legislation at the finance bill 2009", said the Treasury on Monday.

Darling also announced that the government will make available £1bn for small businesses in need of funds. Seven UK banks have asked for access to the £4bn offered to SMEs by the EU. Small exporters will get help with an extra £1bn via Export Credit Guarantees.

Smaller firms will also be able to spread their tax payments, not just VAT, over a longer period. ®

Top 5 reasons to deploy VMware with Tegile

More from The Register

next story
Bono apologises for iTunes album dump
Megalomania, generosity and FEAR of irrelevance drove group to Apple deal
Facebook, Apple: LADIES! Why not FREEZE your EGGS? It's on the company!
No biological clockwatching when you work in Silicon Valley
Doctor Who's Flatline: Cool monsters, yes, but utterly limp subplots
We know what the Doctor does, stop going on about it already
Happiness economics is bollocks. Oh, UK.gov just adopted it? Er ...
Opportunity doesn't knock; it costs us instead
Arab States make play for greater government control of the internet
Nerds told to get lost in last-minute power grab bid at UN meeting
'Cowardly, venomous trolls' threatened with TWO-YEAR sentences for menacing posts
UK government: 'Taking a stand against a baying cyber-mob'
Apple SILENCES Bose, YANKS headphones from stores
The, er, Beats go on after noise-cancelling spat
Zippy one-liners, broken promises: Doctor Who on the Orient Express
Series finally hits stride, but Clara's U-turn is baffling
prev story

Whitepapers

Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Win a year’s supply of chocolate
There is no techie angle to this competition so we're not going to pretend there is, but everyone loves chocolate so who cares.
Why cloud backup?
Combining the latest advancements in disk-based backup with secure, integrated, cloud technologies offer organizations fast and assured recovery of their critical enterprise data.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Saudi Petroleum chooses Tegile storage solution
A storage solution that addresses company growth and performance for business-critical applications of caseware archive and search along with other key operational systems.